Disability Insurance in General Equilibrium

TitleDisability Insurance in General Equilibrium
Publication TypeThesis
Year of Publication2012
AuthorsWang, R
AdvisorYoung, E
Degree3531214
Number of Pages138
Date Published2012
UniversityUniversity of Virginia
Thesis TypePh.D.
Accession Number1151450347
KeywordsDisabilities, Event History/Life Cycle, Methodology, Other, Public Policy, Social Security
Abstract

The Social Security Disability Insurance (DI) Program, which provides income protection to qualified workers who suffer from disabilities, is now facing rapid growth in the number of recipients. The DI program also discourages exit by workers whose health improves by penalizing work heavily. In the first chapter, I build a dynamic general equilibrium model to provide a quantitative analysis of the welfare effects of the DI program and the impact of DI policy reforms on the program's financial health and on worker behavior and welfare. A recently proposed policy to provide two extra years of partial benefits for DI beneficiaries returning to work would reduce the size of the DI beneficiary population, lowering total DI payments and the tax rate and raising welfare of a healthy newborn by 0.33%. Increasing the Social Security Normal Retirement Age from 65 to 67 raises the number of DI recipients by 8.9%. Policy changes strengthening the strictness of disability criteria increase social welfare mainly due to the reduction in the tax rate. Lastly, simulation results for the case of eliminating the DI program shows a large welfare gain in the new steady state, implying that the distortionary effects of taxation outweigh the gains from providing insurance. The second chapter takes into consideration that people can also obtain financial protection from public and private health insurance programs to have medical costs covered when they suffer health problems. I build a dynamic general equilibrium model to quantitatively analyze the impact of policy reforms on the DI program and on workers' behavior and welfare when Medicare, Medicaid, and employer-sponsored health insurance programs interact with the DI program. A policy change strengthening the strictness of the DI admission process increases social welfare mainly due to the reduction in the tax rate and the increase in the wage level. Expanding Medicaid eligibility, which is a provision in the Affordable Care Act, reduces the number of DI recipients by 4.0% and increases general equilibrium welfare by 0.1%. However, the welfare effects differ by education.

Notes

Copyright - Copyright ProQuest, UMI Dissertations Publishing 2012 Last updated - 2013-04-25 First page - n/a

Endnote Keywords

Economics

Endnote ID

69238

Short TitleDisability Insurance in General Equilibrium
Citation Key6142